Australian retailers advance after data

SarahTurner

SYDNEY (MarketWatch) — Australian retailers gained ground on Monday after data showed a modest increase in November sales, with sentiment also aided by expectations that a soft outlook for the coming months may prevent the central bank from raising interest rates further.

Seasonally-adjusted sales increased 0.3% in November from the previous month, data released by the Australian Bureau of Statistics showed. The in-line reading contrasted with the previous month’s data, when retail sales unexpectedly dropped 0.8% — a figure that was revised up Monday from a previous reading showing a 1.1% decline. On a year-on-year basis, November retail sales rose 1.3%.

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Behind the increase, sales for the other retailing and department store categories advanced 0.8% each, although food sales were an area of weakness, falling 0.1% in the month. But consumption is unlikely to show a big improvement in the next few months, some economists believe.

UBS economists said retail spending will only pick up modestly in the near term, because of ongoing wet weather in December and January, together with recent flooding in Queensland. Against this backdrop. the RBA will stay pat on its policy interest rate at 4.75% for most, if not all of the first half of 2011, they believe.

National Australia Bank economists also said that the November retail data gives the RBA further reason to hold fire on raising rates in the coming months.

“While this was the eighth increase in retail sales in the past nine months, the pace of retail growth is clearly slowing,” they said.

The Australian dollar
AUDUSD, -0.2144%
advanced 0.2% to 99.75 U.S. cents after the data.

The advance for retailers could signal relief that sales figures weren’t worse in a month, when the Reserve Bank of Australia unexpectedly raised its key cash rate by a quarter-point, which prompted larger hikes from all four major Australian retail banks.

October’s unexpectedly poor data highlighted that Australian consumers remained cautious about spending amid a central bank focused on inflation, while wet weather also likely kept shoppers away from stores.

Data from the all-important Christmas shopping period will be released next month.

“Early reports from retailers suggest that whilst post-Christmas sales were reasonable, (3% year-on-year according to the retailers’ association), pre-Christmas sales were soft. As a result, we expect consumption in real terms to have been around 0.4% for the quarter,” said economists at RBC Capital Markets.

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